When Does a Margin Call Start?

When Does a Margin Call Start?

A margin call is triggered when the value of your collateral falls below a certain threshold compared to your loan balance. This is an essential mechanism designed to mitigate risks and ensure that the loan remains adequately secured.

A margin call begins when the value of your collateral becomes less than 120% of your current loan balance.

Example Calculation

  • Loan Balance: €100,000
  • Margin Call Threshold:
    100,000+(100,000×0.2)=120,000 EUR100,000 + (100,000 \times 0.2) = 120,000 \, \text{EUR}100,000+(100,000×0.2)=120,000EUR

If the collateral value drops below €120,000, the loan will enter a margin call.

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